In episode 32 of Acquired, hosts Ben Gilbert and David Rosenthal discuss Snapchat's highly anticipated IPO, analyzing its positioning as a camera company and its pivot away from being just a social network. The episode delves into Snapchat's narrative, contrasting their self-portrayal as an innovative brand advertising business with media skepticism about user growth and infrastructure costs. They also highlight CEO Evan Spiegel's product genius and how the IPO's success will rely on Snapchat's potential to innovate beyond what Facebook can replicate. Additionally, the episode features a sponsorship from Pilot, an accounting firm for startups, and explores the implications of Snap's unique voting structure, where public investors hold no voting power, a move that secures founder control but raises questions about investor influence.
"But last year, the whatever Merrin Webster added an additional definition to literally to mean figuratively. So it literally means the sum total of everything that it means and everything that it doesn't mean."
This quote highlights the evolving nature of language and how dictionaries respond to changes in usage, even when such changes may be controversial or contradict traditional definitions.
"Welcome to episode 32 of Acquired, the podcast where we talk about technology acquisitions and ipos. I'm Ben Gilbert." "And I'm David Rosenthal." "And we are your hosts. Today's episode is the Super bowl for our world, the Snapchat IPO."
The quotes introduce the hosts and set the stage for the episode's focus on Snapchat's IPO, emphasizing its importance in the tech industry.
"Pilot is the one team for all of your company's accounting, tax and bookkeeping needs, and in fact, now is the largest startup focused accounting firm in the US."
The quote explains Pilot's role as a comprehensive financial services provider for startups, highlighting its growth and status within the industry.
"And accounting is like example number one of what he's talking about. Every company needs it. It needs to be done by a professional. You don't want to take any risk of anything going wrong, but at the same time, it has zero impact on your product or customers, things you do uniquely well."
The quote emphasizes the importance of professional accounting services for companies and how outsourcing such tasks allows businesses to focus on their core offerings without compromising on financial accuracy or compliance.
"So if you like the show and want us to read your comment on the air, leave a review on iTunes. And we've also got a slack. I just looked, we are 475 strong of people hanging out talking m and a ipos tech in general."
This quote is a call to action for listeners to engage with the show by leaving reviews and joining the Slack community, illustrating the interactive nature of the podcast and its community-driven content.
"But we talked about this what if acquisition where Facebook made a $3 billion." "Made a $3 billion offer to buy Snapchat back in. Shoot, I'm blank. It was the end of 2013, right?"
These quotes reference Facebook's significant offer to acquire Snapchat, setting the context for discussing Snapchat's growth and strategic decisions leading up to the IPO.
"They launched Discover, which then became publisher stories. They launched lenses, they launched geofilters, they launched a whole ton of new chat features, which are actually pretty cool."
The quote lists various features Snapchat developed, showing the company's continuous innovation and adaptation to remain competitive in the social media space.
"So this has literally never happened before. Companies have gone public with dual class, or even three classes of share structures that allowed management and founders to retain effective voting control of the company."
This quote explains the unprecedented nature of Snapchat's voting structure in its IPO, which grants no voting rights to public shareholders, consolidating control with the founders.
"And then yesterday, on Thursday, which, yeah." "You're right, that is an upround from their previous financing, despite talks of that share range would have been a down round and that would have been kind."
The quotes discuss the IPO's pricing and the positive market response, indicating strong investor interest and a valuation increase from the last private financing round.
"So far, a successful IPO. We have not had any Facebook like disasters."
This quote highlights the positive market reception of Snap's IPO and contrasts it with Facebook's problematic IPO, emphasizing the lack of technical issues and the immediate price increase as indicators of success.
"Snap left a good amount of money on the table, about a billion dollars on the table, by not initially setting it in that 23 $24 range."
This quote points out the potential financial downside of Snap's conservative IPO pricing for the company itself, suggesting that a higher initial price could have captured more capital for Snap.
"Snap is a camera company, and you don't even know what a modern camera company looks like."
This quote reflects Snap's bold redefinition of its identity, challenging the traditional concept of a camera company and setting the stage for innovation in the field.
"They want you to buy on the idea and hold on the idea that they're going to continue to do that and reinvent the camera for the future."
This quote explains Snap's long-term strategy to attract investors who believe in the company's vision of continuous innovation and reinvention of camera technology.
"The narrative that Snap has been trying to tell over the past month and the narrative that the media and the investor press has been telling."
This quote introduces the concept of differing narratives—the company's self-portrayed image versus the perception shaped by media and investors.
"They don't want investors to buy this IPO based on the product. Right now, the social graph right now, the growth rates in the last six months, they don't want to be priced on any of that."
The quote indicates Snap's intention to steer investor focus away from current metrics and towards belief in the company's innovative future potential.
"We are attacking tv, not print media."
This quote underscores Snap's strategic focus on competing with television advertising rather than online direct response advertising, which is more typical of digital platforms like Facebook and Google.
"Snap is making the argument here that as Ben said, you know, they are going after tv, after television."
The quote reinforces Snap's approach to advertising, focusing on engagement and broad reach, similar to traditional TV ads, rather than the highly targeted and measurable methods used by other online platforms.
"Snap is an innovation company and that we as a company have done these things."
This quote highlights Snap's self-perception as an innovation-driven company, attributing its success to collective efforts rather than solely to Evan Spiegel.
"They have an Apple esque secrecy about them."
The quote draws a parallel between Snap's culture of innovation and secrecy and that of Apple, suggesting that Snap's internal processes may be similar to those of the tech giant in fostering creativity and product development.
"Snapchat's got real good saturation in the US. They have very little adoption in other countries."
This quote highlights Snapchat's strong domestic market presence in contrast to its weak international reach.
"Instagram has added 100 million daily active users. They went from 300 million to 400 million in seven months."
David Rosenthal points out Instagram's rapid growth, contrasting it with Snapchat's stagnation during the same period.
"What Snapchat has going for them is they fundamentally believe that... Snapchat can do things that are more innovative and more interesting in a product sense for new users."
Ben Gilbert suggests that Snapchat's strength lies in its innovative potential, which must be realized to succeed against competitors like Facebook.
"Facebook is the social network... Snap can go after the young... But Facebook and Instagram have everybody."
David Rosenthal discusses the challenge Snapchat faces in competing with Facebook's extensive user base and established social network.
"Is there something where Snapchat can get up on the side of the canyon and tiptoe along and even waltz past all them, and they can't do anything about it because they can't get up the canyon."
Ben Gilbert uses a metaphor to describe Snapchat's need to find a unique strategic position that Facebook cannot easily counter.
"We're a camera company, and to be a bull on Snapchat right now, you have to believe that they are going to basically pivot the market into a dimension that Facebook can't compete with them on."
David Rosenthal explains that betting on Snapchat requires belief in its ability to redefine the market in ways that give it a competitive edge over Facebook.
"Snapchat is gross margin negative as well, or was until very recently."
David Rosenthal notes the financial challenge Snapchat faces with costs exceeding revenue, emphasizing the unusual nature of this for a company going public.
"Why don't you have your own infrastructure to buy now? Why don't you invest in your own data centers?"
Ben Gilbert questions Snapchat's reliance on external cloud services, which contributes to its high infrastructure costs.
"This company was gross margin negative... And they are now a 35 billion plus market cap public company."
David Rosenthal emphasizes the contrast between Snapchat's financial position and its high valuation post-IPO, highlighting the speculative nature of the investment.
"It sounds like a seed deck. It sounds like serious... not the sort of ways on which I would be evaluating a public security."
Ben Gilbert compares the narrative-driven valuation of Snapchat's IPO to early-stage venture funding, suggesting a disconnect between typical public market evaluations and the company's current state.
"They had no choice... They were going to be out of cash if they didn't get this capital infusion."
David Rosenthal explains the financial imperative behind Snapchat's decision to go public, given its cash burn rate and need for capital.
"Why would they pay $35 billion for Snapchat right now?"
Ben Gilbert questions the logic behind a hypothetical acquisition of Snapchat by Facebook, given the latter's successful growth and existing platforms like Instagram and Oculus.
Facebook gets these economies of scale for their advertisers by adding additional networks into the portal.
This quote highlights Facebook's strategy of integrating multiple platforms into a single advertising portal, allowing advertisers to efficiently scale their campaigns across different networks.
If Snapchat bought Twitter and then enabled advertisers to have a single portal to buy advertisements on both platforms and then sort of went on a spree?
This quote speculates on a strategic move where Snapchat could acquire Twitter to consolidate advertising platforms, although it recognizes potential misalignment with Snapchat's core values.
The chairman of the board is, I believe it's, is it Michael Litton, I think, who was the Sony entertainment in, as, in many ways, Hollywood and media and television is as core to Snapchat's dna as Silicon Valley.
This quote emphasizes the significant influence of media and entertainment on Snapchat's identity and strategic direction.
Did Snapchat ask for the right investors? Did they get the right investors, and will they be able to stand up to the scrutiny of quarterly earnings calls for those investors?
This quote questions whether Snapchat has secured an investor base that aligns with its long-term vision and whether these investors will tolerate the pressures of regular financial reporting.
The future of Snap, if it will be the one that they want, is going to be them riding a very different wave.
This quote suggests that Snap's success hinges on its ability to adapt and capitalize on emerging technology trends beyond its original mobile social networking platform.
The viral coefficient of Snapchat is different than the more successful social experiences like Facebook.
This quote discusses how Snapchat's unique user engagement model, which focuses on close communication rather than broad social media reach, may affect its ability to expand into new markets.
Snap has raised so much money, and now with the IPO, even more money. But they were gross margin negative. That hasn't helped them build a great business thus far.
This quote reflects skepticism about whether Snapchat's fundraising efforts, including the IPO, will translate into a successful long-term business given their current financial performance.
This IPO was brilliantly executed by Snap. They told their story so well and positioned themselves perfectly.
This quote praises Snapchat's ability to present a compelling narrative during their IPO process, which resulted in positive short-term performance.
Spiegel and all the other execs weren't anywhere to be found. They headed over to Goldman Sachs, which was one of their IPO managers, and it wasn't their lead left because Morgan Stanley led the IPO and they hung out there for the day.
This quote highlights Snapchat's unconventional approach to their IPO, choosing to limit their public exposure and media interviews in contrast to typical IPO behavior.